City releases Financial Forecast Tool; analysis confirms that local electric utility would be cost effective and could quickly incorporate renewable electricity

Today, the City of Boulder released a Financial Forecast Tool and updated analysis showing that a local electric utility would be cost effective over a 20-year period. Even with conservative estimates, a city-operated utility could meet each of the financial charter metrics approved by voters in 2011 and 2013 and would allow the city to reach at least 80 percent renewable electricity by 2030.

“The city is committed to updating our modeling assumptions,” said Jonathan Koehn, Regional Sustainability coordinator. “The Financial Forecast Tool is the next iteration in determining whether a local electric utility is cost effective. It’s user-friendly and allows anyone to test various inputs.”

Of the four scenarios published today, three result in long-term cost savings, driven by low-cost renewable resources and less expensive power supply, over 20 years. These scenarios used a range of assumptions of key variables, such as: the operating budget of the utility, annual load growth, interest rates, cost to purchase power, a responsible Debt Service Coverage Ratio, and the cost to acquire necessary electric system assets from Xcel Energy.

The tool provides two methods to measure financial strength: savings compared to Xcel Energy and cash flow. By each measure, a city-run utility would be cost effective. The base case of the analysis – which represents the most likely scenario and compares it with Xcel’s projected rates – demonstrates significant potential savings. After expenses and debt payments are met, a municipal electric utility would generate approximately $13 million in savings over five years and over $100 million over 10 years, compared to staying with Xcel Energy. In terms of cash flow, this means that a municipal utility would have positive cash flow in each year of the 20-year forecast, approximately $57 million after five years and approximately $200 million after 10 years.

“These are impressive revenues, and they would stay in our community,” said Heather Bailey, executive director of Energy Strategy and Electric Utility Development. “This money could fund any number of programs, from significant improvements to reliability, or lower rates compared to Xcel, to the kind of innovative and equitable projects we know our community will expect.”

The city’s analysis does show that there are scenarios under which the city’s cost burden would be too great. The most expensive of these scenarios would occur if the city were to buy power from Xcel Energy for all 20 years. This scenario is neither cost effective nor likely to meet the city’s clean electricity goals. In its recent filing with the Colorado Public Utilities Commission, the city has indicated it plans to buy power from Xcel Energy for some time; however, the length of that purchase agreement will be determined in future regulatory and legal proceedings. City Council has repeatedly indicated that it would only pursue municipalization under one of the many financially feasible scenarios.

In addition to releasing these results, the city is making the tool it used to conduct its analysis available to the public. The Financial Forecast Tool represents a way to analyze the best data available to date. It will continue to be updated as additional data is collected through legal proceedings, as well as through continued research and analysis.

Staff and consultants, including Michael Hubbard, a utility financial analyst; Warren Wendling; a former PUC chief engineer; PFM, an independent financial and investment advisor to government entities and non-profits; and city finance staff, developed the Financial Forecast Tool in 2016. The tool was created to meet several goals related to municipalization, including evaluating cash flows and budgets, generating long-term forecasts, testing the sensitivity of key variables and assessing financial metrics.

“The analysis performed in 2013 evaluated several methods of demonstrating that a utility was feasible. This tool evaluates the cash flows of the utility and more directly meets our immediate needs in terms of assessing the cost effectiveness of a possible local electric utility. It will also be useful in the operations and financial planning of a future city-owned utility,” said Yael Gichon, Energy Sustainability coordinator. “It is quite similar to tools other utilities use in their operations today.”

A public information session about the tool and the city’s findings will be held on Thursday, Nov. 10 from 6 to 8 p.m. at First Presbyterian Church (1820 15th St.). Staff will provide an overview of the analysis and then provide hands-on support to smaller groups wishing to use the tool. Attendees are encouraged to bring a laptop with you if they wish to work through the tool on their own devices. More information is available at https://bouldercolorado.gov/energy-future/financial-forecasting-tool